Australia Needs Global Carbon Trading Now, Industry Lobby Says

March 7 (Bloomberg) -- Australia should scrap its fixed
price on carbon because it puts domestic companies at a
disadvantage and immediately start emissions trading linked to
global markets, the nation’s top industry lobby group said.

“Australian businesses could be taking advantage of these
low international prices through emissions trading,” the
Australian Industry Group said in an e-mailed statement today.
“Instead we are stuck with the government’s high fixed
prices.” The group also expressed reservations about the
climate strategy proposed by the opposition party favored to win
an election scheduled for Sept. 14.

The nation’s ruling Labor party set the price of carbon at
A$23 ($23.60) a metric ton in July 2012 as its main tool for
reducing Australia’s reliance on coal and meeting its target for
a 5 percent cut in greenhouse gases by 2020. While the country
is scheduled to phase out fixed-cost emissions in favor of
market-based prices in 2015, the industry group is pushing to
immediately jettison a rate that is currently about four times
what emitters pay in the European Union, which runs the world’s
biggest cap-and-trade system.

Prime Minister Julia Gillard’s government amended its
carbon legislation in August 2012, linking Australia’s emissions
market with the EU. The revisions enabled emitters to begin
immediately buying EU permits for compliance when Australia’s
cap-and-trade system starts in 2015.

Since Australia opened the door to EU permits on Aug. 28,
they have dropped by almost 50 percent, settling yesterday at
4.28 euros ($5.56) a metric ton on the ICE Futures Europe
exchange in London. EU prices collapsed as the European
Commission struggled to eliminate an oversupply of allowances.

Record Low

“Australia’s emitters understandably want cheap carbon,
and right now we have record low EU prices,” said Seb Henbest,
the Sydney-based head of carbon-market analysis for Bloomberg
New Energy Finance.

Industry support for carbon trading recognizes that it is
the most cost-effective way to reduce emissions and that
Australian opposition leader Tony Abbott, favored to win the
next election, may find it hard to fulfill his pledge of
scrapping the nation’s carbon price, Henbest said. While
Abbott’s Liberal-National coalition is leading in opinion polls,
it probably won’t win enough seats to repeal Gillard’s Clean
Energy Act, Henbest said in Feb. 27 report.

“The manufacturing sector may not be confident that the
coalition will be able to get rid of the carbon price,” said
Henbest, who predicts that Abbott has a one-in-three chance of
succeeding. “Even if it can, there is an expectation that
sooner or later carbon price policy will be brought back, and
that ongoing uncertainty makes life difficult.”

‘Pledge in Blood’

The Australian Industry Group, which represents more than
60,000 businesses, said it doesn’t support the alternative
proposed by Abbott. The opposition leader gave a “pledge in
blood” that he will scrap the levy for about 300 of the
nation’s largest polluters, calling it a wrecking ball for
Australia’s economy.

Abbott wants to replace it with his so-called Direct Action
Plan that would commit as much as A$750 million a year to reward
entities that demonstrate the most cost-effective spending to
cut emissions, opposition climate spokesman Greg Hunt said in
November 2012.

“The alternative approach from the opposition would only
permit domestic abatement without international linkage and,
even on the most optimistic assumptions, would see abatement
prices more than double international levels,” the group said.